Is CoBank ever going to stop stretching the boundaries of Farm Credit’s “similar entity” lending provisions?
Not likely any time soon. In January, Intersect Power LLC announced the operation of “Athos III,” a solar project based in Riverside County, California. An aggregate of $2.6 billion in financing commitments was required for this project, with CoBank participating in $800 million of construction financing as a joint lead arranger.
CoBank is the Farm Credit System’s (FCS) largest institution, clocking in at more than $170 billion in total assets. It has special authority to lend to “rural electric, telephone, public utility, and service cooperatives.” So naturally, it extends financing for giant energy deals, massive publicly-traded companies and refinancing foreign notes.
There’s a lot wrong with this picture. First, there’s no indication that Intersect Power LLC is a cooperative. Though it’s possible for cooperatives to exist under an LLC structure, depending on the state, it’s unlikely to be the case for Intersect Power LLC, which does not mention a cooperative status on its website.
Second, if it’s the case that Intersect Power LLC is not a cooperative, and yet it’s able to obtain financing from a slew of commercial lenders, then why does CoBank need to be involved at all?
These questions, though, are matters of policy, not law. The Farm Credit Act of 1971 as amended is clear that CoBank has the authority to lend to Intersect Power LLC because it’s a “similar entity,” “functionally similar to an entity eligible for a loan,” including “rural electric, telephone, public utility, and service cooperatives.”
CoBank’s clear pattern of lending to private energy companies and agribusinesses raises an important question: how much does CoBank lend to actual cooperatives providing rural electric, telephone and public utilities? It so often uses its similar entity authority to lend to companies like WattBridge Energy LLC.
Congress needs to ask this question to determine just how much CoBank and Farm Credit as a whole are serving cooperatives versus private companies. If it’s the case that CoBank is lending more often to private companies under the “similar entity” designation, then Congress should examine whether CoBank is adequately serving America’s rural cooperatives. If it isn’t, then Congress should consider whether CoBank should be serving “similar entities” at rural cooperatives’ expense. Enough is enough.